Build your decision case before exclusivity
Normalize the economics, define walk-away terms, and compare the offer with continued ownership.
An unsolicited offer creates a transaction decision before the owner has necessarily prepared to make one. The first task is not to accept or reject it. It is to build a reliable decision case before granting exclusivity.
Start with the economics. Normalize historical earnings, identify credible adjustments, and clarify the buyer’s assumptions. Then model estimated proceeds under each proposed form of consideration, including debt repayment, working-capital mechanics, escrow, rollover equity, seller financing, contingent payments, transaction expenses, and taxes with qualified advisers.
Next, compare the proposal with continued ownership. What cash flow and growth could the business reasonably produce? What additional capital, management depth, and risk would that require? How much value do you place on control, and how much concentration or operating responsibility do you want to retain?
Define walk-away terms before negotiation fatigue develops. These may address minimum cash at closing, acceptable contingent value, the owner’s post-closing role, treatment of employees or brand, financing certainty, and a deadline for buyer progress.
Finally, test the counterparty. Confirm capital sources, approval steps, diligence scope, and the reasons the buyer believes it can create value.
With that analysis in hand, the owner can decide whether the offer provides enough value and certainty to justify a bilateral letter of intent or whether a broader market test is warranted. The objective is an informed choice, not a reflexive auction.